Energy & the Law

NOVEMBER 3, 2023

So, you found all the heirs and you have an agreed judgment stipulating title. Time to pay royslties? Maybe. And you have signed division orders. Surely, you can pay now? Maybe. These were the questions facing the parties in Perdido Properties LLC v. Devon Energy Production Company et al. Facts and events Ross Brady dies, bequeathing a royalty interest in Ector County, 75% to wife Pauline and 12.5% each to his two sisters.

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Conservation 147

Energy & the Law

OCTOBER 27, 2023

Most states call it a third-party beneficiary contract. Leave it to Louisiana to be different. In Adams v. Chevron USA Inc. , the plaintiffs claimed that oilfield pipe-cleaning activities of Chevron and others contaminated their land with NORM. The Grafers owned the land where, pursuant to a lease, the pipes and other equipment were cleaned. Plaintiffs also sought damages from the Grefers for their own alleged negligence.

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2014 147

Energy & the Law

OCTOBER 23, 2023

Foreshadowing a grim future for family weddings and funerals, Bell and Petsch v. Petch is a property dispute over five tracts of land in Gillespie County, Texas, in which siblings are the combatants. The events are less important than the takeaway: To win an adverse possession claim, the claimant must establish all six of the elements. Adverse possession , the requirements actual and visible possession of the disputed property that is adverse and hostile to the claims of the owner of record titl

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2020 Law 147

Energy & the Law

OCTOBER 19, 2023

The question in Self v, BPX Operating Company is how to balance the Louisiana Civil Code Art 2292 principle of negotiorum gestio against Louisiana’s conservation statutes. When a tract of land is subject to a unit formed under La. R.S. 30:9(B) and 30:10(A(1) and the tract is not subject to a lease, the unit operator can sell the landowner’s share of production but must pay the landowner his pro rata share of “proceeds”.

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Energy & the Law

OCTOBER 16, 2023

Barkley v. Connally , a “bet-the-farm” case if there ever was one, invokes the merger clause, a basic principle of contract law. Clients and lawyers: Read this analysis so as to avoid boundless grief and disappointment for client and lawyer alike. Jim Barkley, having undergone bankruptcy and nearing retirement, agreed to sell his farm to Connally, owner of an adjacent tract, if Jim and Ms.

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2017 Law 147

Energy & the Law

OCTOBER 10, 2023

Parish of Plaquemines v. Northcoast Oil Co. is yet another remand of yet another of the 43 suits filed in state courts against a legion of oil and gas companies under the Louisiana’s State and Local Coastal Resources Management Act of 1978. The suits arise out of the defendants’ decades-long oil production activities on the Louisiana coast. So far, the message seems to be: Producers, surrender to the jurisdiction of the state courts and trust in the wisdom of the well-intentioned citizen-jurors

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Energy & the Law

OCTOBER 5, 2023

Can the Texas lessee perpetuate his oil and gas lease by “constructive participation” in wells drilled by another? Under the facts in Cromwell v. Anadarko E&P Onshore, LLC, the answer is no. Cromwell and Anadarko’s wells In 2009 Cromwell obtained the Ferrer and Tantalo leases covering small fractional interests in several sections. Anadarko owned working interests in the same sections.

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Energy & the Law

SEPTEMBER 28, 2023

Co-author Katherine Sartain* If you are scoring at home, count Permico Royalties LLC v. Barron Properties, Ltd. , as a win for “floating” in the fixed-or-floating royalty battles. Permico, successor to grantors in a 1937 Deed for a tract in Ward County, argued that a mineral reservation was of a ½ floating royalty interest. Barron, successor to grantee and owner of the mineral estate subject to the reservation, claimed that the deed reserved a 1/16 fixed royalty.

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Law 147

Energy & the Law

SEPTEMBER 15, 2023

Co-author Katherine Sartain * We begin with a document-drafting tip: When reserving an interest in minerals, before cutting and pasting from your old document that would be yellowed and dusty if it remained in its original papyrus format, lawyers and non-lawyers alike should consider Devon Energy Prod. Co. v. Enplat II, LLC. The Court was asked to determine whether a 1940 deed from Harris et al to Lopoo conveying a tract in Reeves County, Texas, reserved a cost-free royalty interest or a cost-be

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Law 147

Energy & the Law

SEPTEMBER 13, 2023

Unit Petroleum Company v. Koch Energy Services, LLC is another force majeure case arising out of winter storm Uri. Unlike a similar case, summary judgment was denied because, said the United States District Court, The word “reasonable”, although not ambiguous, is a question of fact that must be answered by looking into the circumstances of the case at issue, including the nature of the proposed contract, the purposes of the parties, the course of dealing between them, and any relevant usages of

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Energy & the Law

SEPTEMBER 7, 2023

Davenport v. EOG Resources, Inc. is an appeal of a temporary injunction. The title tells you the result. Davenport owned four tracts comprising 5,000 acres in Webb County that were originally part of a larger tract burdened by the 1967 Garner oil and gas lease. EOG has operated the lease since 1999 and its chief point of entry had been the Krueger Road gate on the east side of the ranch.

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2022 Law 147

Energy & the Law

SEPTEMBER 4, 2023

Co-author Stephen A. Cooney In Cactus Water Services LLC v. COG Operating, LLC. , a divided Texas court of appeals answered the question this way: The oil and gas producer prevails over the purchaser of the surface owner’s right to own and sell produced water. The majority discussed the composition of produced water. To be scientific, it’s got a bunch of nasty s$%^ in it that needs to be gotten rid of.

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Energy & the Law

AUGUST 29, 2023

Rhetorical Question: When will Texas be done with fixed/floating royalty cases such as Johnson et al v. Clifton et al ? Rhetorical Answer: When scriveners of deeds that are open to eight conceivably plausible meanings have completed their remedial scrivening courses. How did it happen? In 1951 Young and others conveyed to Clifton and others several thousand acres in Reeves County by a deed reserving a 1/128 interest in oil, gas and other minerals.

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Energy & the Law

AUGUST 16, 2023

Co-author London England Producers disappointed by the Supreme Court’s holding in Devon Energy Production v. Sheppard might have reason to feel vindicated. The question in HL Hawkins Jr., Inc. v. Capitan Energy Inc. et al. was whether producer Capitan deducted impermissible post-production costs from gross proceeds used to calculate royalties. Lessor Hawkins‘ royalty was one fourth of gross proceeds.

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Energy & the Law

AUGUST 9, 2023

In Smart v. 3039 RNC Holdings LLC , the court reminds us that it will harmonize all parts of a contract, even one that “is not a model of clarity”, to reach the correct result. RNC owned the surface and 50% of the mineral estate in a 45.6 acre tract in Karnes County. RNC agreed to convey and Smart agreed to purchase the surface and part of the mineral estate.

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Energy & the Law

JULY 31, 2023

The plain, ordinary, and generally accepted meaning of a word doesn’t mean “anything goes”. It depends on context, says the Supreme Court of Texas in Finley Resources Inc. v. Headington Royalty Inc. , a dispute over the meaning of “predecessors”. For the underlying facts see our post on the court of appeals decision. The release The release in an acreage-swap agreement between Petro Canyon Energy and Headington said that “Headington [ releases, etc.

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Energy & the Law

JULY 18, 2023

California has passed Senate Bill 1137, which will prohibit drilling of new oil and gas wells and reworking of existing wells in certain areas. Here is SB 1137 in legislativese (analysis comes first, then the text): Here, in small part, is what the Bill does: The Bill defines “sensitive receptors” as Hollywood A-listers and Stanford law students and their VP of DEI scolding who cannot tolerate voices they don’t agree with “residences, education facilities, day care centers, colleges and universi

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Energy & the Law

JULY 14, 2023

Co-author Taylor Hall* The Texas Legislature has created a new Texas Business Court (the TBC) with jurisdiction over cases involving certain qualified (as in “big-dollar”) business transactions. HB 19 could affect large oil and gas cases; how and to what extent is to be determined. The consequences, intended and unintended, will be good and bad, depending on your point of view.

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Energy & the Law

JULY 12, 2023

The Austin Court of Appeals has ruled in Texas Railroad Commission et al v. Opiela , the dispute over a permit for a horizontal well under a Production Sharing Agreement. We reported on the result in the trial court. Here are some highlights of the appeal. Where did the 65% rule come from? The court traced the Commission’s authority to a 2008 minute entry in which two of the three commissioners approved a permit while directing staff that wells that are permitted based on PSA’s should be approv

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Energy & the Law

JUNE 28, 2023

LSU 3B Tommy “Tanks” salutes energyandthelaw at the Men’s College World Series. Co-author Cahill Maffei* Can a non-operating working interest in a Texas oil and gas lease be adversely possessed? The Amarillo Court of Appeals said yes in PBEX II, LLC v. Dorchester Minerals, L.P. In 1989, Torch Oil & Gas succeeded to a working interest in two producing gas wells.

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Energy & the Law

JUNE 23, 2023

Co-author Kamal Omar* Texas, famously, does not tax individuals’ income, but it does impose franchise taxes on “taxable entities”, such as limited liability companies. Federal tax law treats them as partnerships unless they elect to be treated otherwise. In Hibernia Energy LLC v. Hegar , a Texas court addressed how Hibernia, a non-taxable entity under federal law, is taxable under Texas law.

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Energy & the Law

JUNE 14, 2023

Co-author Emily Morris * One of the questions raised in 1776 Energy Partners, LLC v. Marathon Oil EF, LLC was whether Marathon as operator could apply revenues owed to non-operator 1776 under one joint operating agreement to satisfy unpaid debts owed on another. Unfortunately, we don’t have an answer. (FWIW, this is the same “1776” from a recent post , whiffing at the plate again with runners in scoring position.

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Law 130

Energy & the Law

JUNE 2, 2023

Freeeport-McMoRan Oil and Gas, LLC and Ovintiv USA Inc. v. 1776 Energy Partners LLC presented a recurring question faced by Texas oil and gas producers: When can proceeds of production be withheld by the operator without liability for interest? Ovintiv and its predecessor operator, Freeport-McMoRan, represented by Gray Reed partners Jim Ormiston and David Leonard , suspended proceeds it was contractually obligated to pay to non-operator 1776 in reliance on the safe harbor provisions of Sectio

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Energy & the Law

MAY 24, 2023

Co-author Derek Younkers * And what a difference it was! In Apache Corp. v. Apollo Expl. LLC et al , Apache and others acquired an oil and gas lease on 100,000+ acres in the Texas Panhandle. The primary term was three years. The effective date was January 1, 2007, “from which date the anniversary dates of this Lease shall be computed”. Extension beyond the primary term required a producing well and the creation of three blocks of equal acreage from which the lessees would drill wells to a combi

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Energy & the Law

MAY 17, 2023

You might recall our posts on litigation by states, counties, and cities blaming a host of calamities, real and imagined, past and future, on Big Oil. The producers tried their best to remove the cases to federal court. In a two-sentence ruling, the United States Supreme Court refused to consider defendants’ Hail-Mary to have the cases remain in federal court.

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Energy & the Law

MAY 10, 2023

Imagine these facts in a force majeure dispute (as presented in Point Energy Partners Permian LLC et al. v. MRC Permian Company ). Lessee (MRC) invokes the force majeure provision of an oil and gas lease, asserting that “wellbore instability” on a well on an unrelated lease requires the lessee to effectively redrill portions of the other well, setting back its rig schedule for the lease at issue.

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Energy & the Law

MAY 2, 2023

In TotalEnergies E&P USA, Inc. v. MP Gulf of Mexico LLC. t he Supreme Court of Texas resolved the chaos created by conflicting dispute resolution regimes in three contracts for ownership and operation of an offshore unit and gathering system. The essential question: Did the parties agree that an arbitrator, rather than the courts, must determine the arbitrability of the disputes.

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2022 Law 130

Energy & the Law

APRIL 24, 2023

Golden Eagle Resources II LLC v. Rice Drilling D LLC. presents a small step in the development of subsurface trespass law in Ohio. The federal court considered a motion to dismiss, in which it evaluated the sufficiency of the complaint to state a cause of action. Such a motion is not a challenge to plaintiff Golden Eagle’s factual allegations. The causes of action were trespass and conversion.

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Energy & the Law

APRIL 18, 2023

As you negotiate your master service agreements are you confident that you know how insurance choices might affect indemnity obligations? Me neither. That’s why I turn to my Gray Reed partner Darin Brooks and his insurance coverage lawyers. I didn’t consult them about this post so anything wrong is on me not them. A basic principle of Texas insurance law is that a separate contract may be incorporated by reference into an insurance policy only if that reference is clearly manifested in the terms

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Law 130

Energy & the Law

APRIL 6, 2023

MIECO, LLC v. Pioneer Natural Resources presented a challenge to a force majeure defense in a dispute arising from Winter Storm Uri. The defense carried the day. MIECO agreed to purchase 20,000 MMBtu/day of natural gas from Pioneer. Pioneer delivered residue gas from the tailgate of a Targa processing plant to two points near the border of Arizona and California.

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Energy & the Law

MARCH 28, 2023

Co-author Caleb White In a recurring theme, harmony and the four-corners rule were front and center in Citation 2002 Inv. LLC et al v. Occidental Permian, Ltd. et al , a case of competing claims over the granting language in an assignment of oil and gas leases. Occidental (Oxy) claimed assignor Shell Western reserved mineral interests at certain depths from a conveyance to previous assignee, Citation, and that those reserved interests were later assigned by Shell Western to Oxy.

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Energy & the Law

MARCH 22, 2023

Co-author Caleb White* Davis v. COG Operating, LLC , in construing a Warranty Deed with a reservation of minerals, applied the estate-misconception doctrine and denied the presumed grant doctrine. At issue were three instruments: A 1926 mineral lease from the Sesslers to Campbell. A 1926 “Royalty Deed” from Sesslers to Haun. A 1939 Warranty Deed from the Sesslers to Roberts, in which the parties acknowledged that Haun had been conveyed 1/32 of the minerals.The conveyance did not include that i

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Law 130

Energy & the Law

MARCH 16, 2023

In Devon Energy Production Company, LP et al v. Sheppard et al, the Supreme Court of Texas construed what it referred to as a “bespoke” and “highly unique” royalty clause in several oil and gas leases to prohibit the producers from deducting out of the lessor’s royalty post-production costs incurred downstream of the point of sale to unaffiliated third parties.

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Law 130

Energy & the Law

MARCH 7, 2023

With it being Lent and all, we ask, are this year’s Ferrymen of the River Styx using these 40 days to turn from wickedness and find their way to repentence? Who knows, but we do know that as alternative energy rises, so do associated grifters, frauds and thieves. And political malpractice is a new category. Break like the wind Perps: Joey Douglas Davis and Philip Vincent Ridings of Arkansas Crimes: fraud, wire fraud, aiding and abetting wire fraud, money laundering, aiding and abetting money-lau

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Energy & the Law

MARCH 3, 2023

Co-author Tiereney Bowman* Texas courts continue to address the “fixed or floating” non-participating royalty interest question. The El Paso Court of Appeals’ answer in Bridges v. Uhl et al. was floating, based on the language in that particular reservation, In 1940 the Klattenhoffs sold a 640-acre tract in Upton County to Virgil Powell, reserving, “an undivided one-half (1/2) of the usual one-eighth (1/8) royalty in, to and under the above-described land….

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Energy & the Law

MARCH 1, 2023

Co-author Travis Nadilini Ellison v. Three Rivers Acquisition LLC et al. , on remand from the Texas Supreme Court, is the third round of a boundary dispute between mineral lessees in Irion County. For the history of Ms. Ellison’s odyssey from court to court to court, see our 2019 post discussing the first Court of Appeals decision , and our 2021 post discussing the Supreme Court decision.

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Energy & the Law

FEBRUARY 16, 2023

Co-author Travis Nadalini The negotiators and scriveners of the purchase and sale agreement in Matter of PetroQuest Energy, Incorporated would have been well served to have considered all the potential ramifications, however remote, flowing from the definitions in their agreement. (Potential reply: “Who woulda thunk THAT would happen?”) The Fifth Circuit, applying Louisiana law, held that in a federal offshore Gulf of Mexico lease trade, if a purchaser assumes liabilities for “Assets” under a pu

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